Practice National Taxation

When will the Tax Court of Canada resume in-person sittings?

Some notable decisions recently announced from videoconference hearings

Author: Canadian Accountant

TORONTO, September 3, 2021 – The Tax Court of Canada is currently holding virtual hearings and proceeding with written submissions due to the Covid-19 pandemic. That may come to an end in less than a week, however, as Chief Justice Eugene Rossiter previously announced an end date of Friday, September 10, 2021 to the cancellation of in-person sittings. 

The Tax Court has faced numerous challenges during the pandemic in holding court sittings and has struggled with a backlog of cases. As reported by Canadian Accountant, the Tax Court first closed in March 2020 due to the onset of the pandemic, and released a 17-point prioritization plan for a reopening later that summer. Part of that plan was to “aggressively” move forward in modernizing and digitizing active files and transitioning to videoconferencing when possible. 

So unusual were the circumstances at the time that, in May 2020, Canadian Accountant took a fond look back at the last Tax Court of Canada case, which had occurred that March. “Sometimes it’s the small details in the Tax Court decisions that are delicious,” we declared, which Bennett Jones LLP summarized as: “The taxpayer was the sole shareholder in the gas station and his vague, uninformed, and consistent failure to keep any reliable records was [a] hallmark reflecting standard of gross negligence.”  

The Tax Court shut down a second time in January 2021 as Ontario entered a second state of emergency, as reported by Canadian Accountant. This time the closure was marked by a far more significant case involving Dow Chemical and transfer pricing. The Court would then announce a series of cancellations of in-person hearings throughout 2021, the most recent of which was announced on June 1, 2021, affecting hearings scheduled between August 16, 2021 and September 10, 2021. 

Notable Tax Court decisions published this summer

While the publication of decisions has slowed significantly, the Tax Court has published several notable decisions of cases finalized through written submissions, and virtual hearings through videoconferencing. Most notable was a decision by Justice Spiro in Paletta Estate v. The Queen, which involved the Paletta family of Burlington, Ont., and a foreign currency trading scheme. 

The Paletta family business, led by patriarch Pasquale (“Pat”) Paletta, was no stranger to the Tax Court, as the Court deemed a previous Paletta investment a sham. This investment strategy, which most notably was also pursued by former Toronto Maple Leafs Shayne Corson and Darcy Tucker, was declared perfectly legitimate by Justice Spiro. 

Unfortunately, the two sides — the Paletta Estate was represented by two lawyers from KPMG Canada — were unable to reach an agreement on costs, despite Justice Spiro stating that it was “abundantly clear” that the Estate was “substantially successful in its appeals,” so Spiro awarded $2,241,025 to the appellant (the Estate wanted $3.5 million). 

(Spiro noted, however, that Paletta (who died in 2019) made false statements or omissions in his 2002 tax return attributable to neglect, carelessness “under circumstances amounting to gross negligence.”) 

A similar case involving written submissions occurred in Hansen V. The Queen. The appellant, Ottawa builder Rick Hansen, sold five houses in the span of six years, which piqued the interest of the Canada Revenue Agency. As reported by the Toronto Star, Hansen was ultimately successful in convincing the Tax Court that these buildings were principal residences. 

It appears that Hansen offered a settlement to the Crown in 2018 but the judgment was more favourable than the appellant’s offer. After Hansen’s lawyers requested that the Tax Court award Hansen enhanced costs for both the period prior to the settlement offer and the period after, Justice Johanne D’Auray awarded Hansen “an enhanced substantial indemnity” of 85 per cent. 

Hansen was represented in Court by Tataryn Law, tax and business firm led by accountant and lawyer Susan Tataryn, a CPA, CA called to the Saskatchewan bar in 1993 and the Ontario bar in 2000. 

To read more recent decisions from the Tax Court of Canada, click here. Canadian Accountant will continue to follow developments at the Tax Court as it decides whether to resume in-person sittings this fall. 

Published by staff at Canadian Accountant.

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